GSIS v. CA

SUPREME COURT REPORTS ANNOTATED VOLUME 585 2/2/20, 3:53 PM
Finally, it bears underscoring that appellant himself

admitted that he was carrying marijuana at the time of his
arrest and even though he knew it was against the law to
so possess it in any amount.27 Hence, the lower courts aptly
held him liable for illegal possession of dangerous drugs.
WHEREFORE, the appealed judgment of conviction is
hereby AFFIRMED in toto.
SO ORDERED.
Quisumbing (Chairperson), Carpio-Morales, Velasco,

Jr. and Brion, JJ., concur.
Judgment affirmed in toto.
Note.·It is the duty of the prosecution to present a

complete picture detailing the buy-bust operation, failing of
which, the buy-bust operation will be greeted with
furrowed brows. (Cabugao vs. People, 435 SCRA 624 [2004])
··o0o··
G.R. No. 183905. April 16, 2009.*
GOVERNMENT SERVICE INSURANCE SYSTEM,

petitioner, vs. THE HON. COURT OF APPEALS, (8TH
DIVISION), ANTHONY V. ROSETE, MANUEL M. LOPEZ,
FELIPE B. ALFONSO, JESUS F. FRANCISCO,
CHRISTIAN S. MONSOD, ELPIDIO L. IBAÑEZ, and
FRANCIS GILES PUNO, respondents.
G.R. No. 184275. April 16, 2009.*
SECURITIES AND EXCHANGE COMMISSION,

COMMISSIONER JESUS ENRIQUE G. MARTINEZ IN
http://www.central.com.ph/sfsreader/session/0000017004dce64ef52818c0003600fb002c009e/p/ATF225/?username=Guest Page 1 of 52
HIS CAPAC-
_______________
27 TSN, 27 January 2004, pp. 13-14, 16.

* SECOND DIVISION.
680
680 SUPREME COURT REPORTS ANNOTATED

Government Service Insurance System vs. Court of Appeals
(Eighth Division)
ITY AS OFFICER-IN-CHARGE OF THE SECURITIES

AND EXCHANGE COMMISSION and HUBERT G.
GUEVARA IN HIS CAPACITY AS DIRECTOR OF THE
COMPLIANCE AND ENFORCEMENT DEPT. OF
SECURITIES, petitioners, vs. ANTHONY V. ROSETE,
MANUEL M. LOPEZ, FELIPE B. ALFONSO, JESUS F.
FRANCISCO, CHRISTIAN S. MONSOD, ELPIDIO L.
IBAÑEZ, and FRANCIS GILES PUNO, respondents.
Appeals; Parties; Under Section 1 of Rule 45, which governs

appeals by certiorari, the right to file the appeal is restricted to „a
party,‰ meaning that only the real parties-in-interest who litigated
the petition for certiorari before the Court of Appeals are entitled to
appeal the same under Rule 45·the Securities and Exchange
Commission (SEC) and its two officers may have been designated as
respondents in the petition for certiorari filed with the Court of
Appeals, but under Section 5 of Rule 65 they are not entitled to be
classified as real parties-in-interest.·The Court, through the
Resolution of the Third Division dated 2 September 2008, had
resolved to treat the petition in G.R. No. 184275 as a petition for
review on certiorari, but withheld giving due course to it. Under
Section 1 of Rule 45, which governs appeals by certiorari, the right
to file the appeal is restricted to „a party,‰ meaning that only the
real parties-in-interest who litigated the petition for certiorari
before the Court of Appeals are entitled to appeal the same under
Rule 45. The SEC and its two officers may have been designated as
respondents in the petition for certiorari filed with the Court of
Appeals, but under Section 5 of Rule 65 they are not entitled to be
classified as real parties-in-interest. Under the provision, the judge,

court, quasi-judicial agency, tribunal, corporation, board, officer or
person to whom grave abuse of discretion is imputed (the SEC and
its two officers in this case) are denominated only as public
respondents. The provision further states that „public respondents
shall not appear in or file an answer or comment to the petition or
any pleading therein.‰
Corporation Law; Securities and Exchange Commission;
Proxies; Words and Phrases; Proxy solicitation involves the securing
and submission of proxies, while proxy validation concerns the
validation of such secured and submitted proxies.·It is plain that
proxy solicitation is a procedure that antecedes proxy validation.
The former involves the securing and submission of proxies, while
the latter
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VOL. 585, APRIL 16, 2009 681
Government Service Insurance System vs. Court of Appeals (Eighth

Division)
concerns the validation of such secured and submitted proxies.

GSIS raises the sensible point that there was no election yet at the
time it filed its petition with the SEC, hence no proper election
contest or controversy yet over which the regular courts may have
jurisdiction. And the point ties its cause of action to alleged
irregularities in the proxy solicitation procedure, a process that
precedes either the validation of proxies or the annual meeting
itself.
Same; Same; Same; Same; Jurisdiction; It is possible that an
intra-corporate controversy may animate a disgruntled shareholder
to complain to the Securities and Exchange Commission (SEC) a
corporationÊs violations of SEC rules and regulations, but that
motive alone should not be sufficient to deprive the SEC of its
investigatory and regulatory powers, especially so since such powers
are exercisable on a motu proprio basis.·Under Section 20.1, the
solicitation of proxies must be in accordance with rules and
regulations issued by the SEC, such as AIRR-SRC Rule 4. And by
virtue of Section 53.1, the SEC has the discretion „to make such
investigations as it deems necessary to determine whether any
person has violated‰ any rule issued by it, such as AIRR-SRC Rule
4. The investigatory power of the SEC established by Section 53.1 is
central to its regulatory authority, most crucial to the public
interest especially as it may pertain to corporations with publicly
traded shares. For that reason, we are not keen on pursuing private
respondentsÊ insistence that the GSIS complaint be viewed as rooted
in an intra-corporate controversy solely within the jurisdiction of
the trial courts to decide. It is possible that an intra-corporate
controversy may animate a disgruntled shareholder to complain to
the SEC a corporationÊs violations of SEC rules and regulations, but
that motive alone should not be sufficient to deprive the SEC of its
investigatory and regulatory powers, especially so since such
powers are exercisable on a motu proprio basis.
Same; Same; Same; Same; Same; The Securities and Exchange
CommissionÊs (SECÊs) power to pass upon the validity of proxies in
relation to election controversies has effectively been withdrawn, tied
as it is to its abrogated jurisdictional powers.·There is an
interesting point, which neither party raises, and it concerns
Section 6(g) of Presidential Decree No. 902-A, which states: xxx
xxx As promulgated then, the provision would confer on the SEC
the power to adjudicate controversies relating not only to proxy
solicitation, but
682

Division)
also to proxy validation. Should the proposition hold true up to the

present, the position of GSIS would have merit, especially since
Section 6 of Presidential Decree No. 902-A was not expressly
repealed or abrogated by the SRC. Yet a closer reading of the
provision indicates that such power of the SEC then was incidental
or ancillary to the „exercise of such jurisdiction.‰ Note that Section
6 is immediately preceded by Section 5, which originally conferred
on the SEC „original and exclusive jurisdiction to hear and decide
cases‰ involving „controversies in the election or appointments of
directors, trustees, officers or managers of such corporations,
partnerships or associations.‰ The cases referred to in Section 5
were transferred from the jurisdiction of the SEC to the regular
courts with the passage of the SRC, specifically Section 5.2. Thus,
the SECÊs power to pass upon the validity of proxies in relation to
election controversies has effectively been withdrawn, tied as it is to
its abrogated jurisdictional powers.
Same; Same; Same; Same; Same; Courts; Evidently, the
jurisdiction of the regular courts over so-called election contests or
controversies under Section 5(c) of P.D. No. 902-A does not extend to
every potential subject that may be voted on by shareholders, but
only to the election of directors or trustees, in which stockholders are
authorized to participate under Section 24 of the Corporation Code;
The power of the Securities and Exchange Commission (SEC) to
investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated
to the cases enumerated under Section 5 of Presidential Decree No.
902-A, but when proxies are solicited in relation to the election of
corporate directors, the resulting controversy, even if it ostensibly
raised the violation of the SEC rules on proxy solicitation, should be
properly seen as an election controversy within the original and
exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the
SRC in relation to Section 5(c) of Presidential Decree No. 902-A.·
Under Section 5(c) of Presidential Decree No. 902-A, in relation to
the SRC, the jurisdiction of the regular trial courts with respect to
election-related controversies is specifically confined to
„controversies in the election or appointment of directors, trustees,
officers or managers of corporations, partnerships, or associations.‰
Evidently, the jurisdiction of the regular courts over so-
called election contests or controversies under Section 5(c)
does not extend to every potential subject that may be voted
on by shareholders, but only to the election of
683
VOL. 585, APRIL 16, 2009 683

Division)
directors or trustees, in which stockholders are authorized

to participate under Section 24 of the Corporation Code.
This qualification allows for a useful distinction that gives due
effect to the statutory right of the SEC to regulate proxy
solicitation, and the statutory jurisdiction of regular courts over
election contests or controversies. The power of the SEC to

investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters
unrelated to the cases enumerated under Section 5 of Presidential
Decree No. 902-A. However, when proxies are solicited in
relation to the election of corporate directors, the resulting
controversy, even if it ostensibly raised the violation of the
SEC rules on proxy solicitation, should be properly seen as
an election controversy within the original and exclusive
jurisdiction of the trial courts by virtue of Section 5.2 of the
SRC in relation to Section 5(c) of Presidential Decree No.
902-A.
Same; Same; Same; Same; Same; Same; The fact that the
jurisdiction of the regular courts under Section 5(c) is confined to the
voting on election of officers, and not on all matters which may be
voted upon by stockholders, elucidates that the power of the
Securities and Exchange Commission (SEC) to regulate proxies
remains extant and could very well be exercised when stockholders
vote on matters other than the election of directors.·Unlike either
Section 20.1 or Section 53.1, which merely alludes to the rule-
making or investigatory power of the SEC, Section 5 of Pres. Decree
No. 902-A sets forth a definitive rule on jurisdiction, expressly
granting as it does „original and exclusive jurisdiction‰ first to the
SEC, and now to the regular courts. The fact that the jurisdiction of
the regular courts under Section 5(c) is confined to the voting on
election of officers, and not on all matters which may be voted upon
by stockholders, elucidates that the power of the SEC to regulate
proxies remains extant and could very well be exercised when
stockholders vote on matters other than the election of directors.
Same; Same; Same; Securities Regulation Code (SRC); Cease
and Desist Orders (CDOs); There are three distinct bases for the
issuance by the Securities and Exchange Commission (SEC) of the
Cease and Desist Order (CDO) under the Securities Regulation Code
·the first, allocated by Section 5(I), is predicated on a necessity „to
prevent fraud or injury to the investing public,‰ the second basis,
684

Division)
found in Section 53.3, involves a determination by the Securities and

Exchange Commission (SEC) that „any person has engaged or is
about to engage in any act or practice constituting a violation of any
provision of this Code, any rule, regulation or order thereunder, or
any rule of an Exchange, registered securities association, clearing
agency or other self-regulatory organization,‰ and, the third basis for
the issuance of a Cease and Desist Order (CDO) is Section 64, a
CDO founded on a determination of an act or practice, which unless
restrained, „will operate as a fraud on investors or is otherwise likely
to cause grave or irreparable injury or prejudice to the investing
public.‰·There are three distinct bases for the issuance by the SEC
of the CDO. The first, allocated by Section 5(i), is predicated on a
necessity „to prevent fraud or injury to the investing public.‰ No
other requisite or detail is tied to this CDO authorized under
Section 5(i). The second basis, found in Section 53.3, involves a
determination by the SEC that „any person has engaged or is about
to engage in any act or practice constituting a violation of any
provision of this Code, any rule, regulation or order thereunder, or
any rule of an Exchange, registered securities association, clearing
agency or other self-regulatory organization.‰ The provision
additionally requires a finding that „there is a reasonable likelihood
of continuing [or engaging in] further or future violations by such
person.‰ The maximum duration of the CDO issued under Section
53.3 is ten (10) days. The third basis for the issuance of a CDO is
Section 64. This CDO is founded on a determination of an act or
practice, which unless restrained, „will operate as a fraud on
investors or is otherwise likely to cause grave or irreparable injury
or prejudice to the investing public.‰ Section 64.1 plainly provides
three segregate instances upon which the SEC may issue the CDO
under this provision: (1) after proper investigation or verification,
(2) motu proprio, or (3) upon verified complaint by any aggrieved
party. While no lifetime is expressly specified for the CDO under
Section 64, the respondent to the CDO may file a formal request for
the lifting thereof, which the SEC must hear within fifteen (15)
days from filing and decide within ten (10) days from the hearing.
Same; Same; Same; Same; Same; Notwithstanding the
similarities between Section 5(i) and Section 64.1, it remains clear
that the Cease and Desist Order (CDO) issued under Section 53.3 is
a distinct creation from that under Section 64.·It appears that the
CDO under Section 5(i) is similar to the CDO under Section 64.1.
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Division)
Both require a common finding of a need to prevent fraud or injury

to the investing public. At the same time, no mention is made
whether the CDO defined under Section 5(i) may be issued ex-parte,
while the CDO under Section 64.1 requires „grave and irreparable‰
injury, language absent in Section 5(i). Notwithstanding the
similarities between Section 5(i) and Section 64.1, it remains clear
that the CDO issued under Section 53.3 is a distinct creation from
that under Section 64.
Same; Same; Same; Same; Same; A singular Cease and Desist
Order (CDO) could not be founded on Section 5.1, Section 53.3 and
Section 64 collectively·at the very least, the CDO under Section
53.3 and under Section 64 have their respective requisites and terms.
·Noticeably, the CDO is not precisely clear whether it was issued
on the basis of Section 5.1, Section 53.3 or Section 64 of the SRC.
The CDO actually refers and cites all three provisions, yet it is
apparent that a singular CDO could not be founded on Section 5.1,
Section 53.3 and Section 64 collectively. At the very least, the CDO
under Section 53.3 and under Section 64 have their respective
requisites and terms.
Same; Same; Same; Same; Same; Administrative Law;
Injunction; Due Process; Considering that injunctive relief generally
avails upon the showing of a clear legal right to such relief, the
inability or unwillingness to lay bare the precise statutory basis for
the prayer for injunction is an obvious impediment to a
successful application, though, nonetheless, the error of the
Securities and Exchange Commission (SEC) in granting the Cease
and Desist Order (CDO) without stating which kind of CDO it was
issuing is more unpardonable, as it is an act that contravenes due
process of law; In administrative proceedings, it is required that the
body or tribunal „in all controversial questions, render its decision
in such a manner that the parties to the proceeding can know the
various issues involved, and the reason for the decision rendered.‰·
GSIS was similarly cagey in its petition before the SEC, it
demurring to state whether it was seeking the CDO under Section

5.1, Section 53.3, or Section 64. Considering that injunctive relief
generally avails upon the showing of a clear legal right to such
relief, the inability or unwillingness to lay bare the precise
statutory basis for the prayer for injunction is an obvious
impediment to a successful application. Nonetheless, the error of
the SEC in granting the CDO without stating which kind of
686

Division)
CDO it was issuing is more unpardonable, as it is an act that

contravenes due process of law. We have particularly required, in
administrative proceedings, that the body or tribunal „in all
controversial questions, render its decision in such a manner that
the parties to the proceeding can know the various issues involved,
and the reason for the decision rendered.‰ This requirement is vital,
as its fulfillment would afford the adverse party the opportunity to
interpose a reasoned and intelligent appeal that is responsive to the
grounds cited against it. The CDO extended by the SEC fails to
provide the needed reasonable clarity of the rationale behind its
issuance.
Same; Same; Same; Same; Same; Same; Same; Same; It is
legally impermissible for the Securities and Exchange Commission
(SEC) to have utilized both Section 53.3 and Section 64 as basis for
the Cease and Desist Order (CDO) at the same time·any respondent
to a CDO which cites both Section 53.3 and Section 64 would not
have an intelligent or adequate basis to respond to the same; The
veritable mélange that the assailed Cease and Desist Order (CDO)
is, with its jumbled mixture of premises and conclusions, the
antithesis of due process.·The citation in the CDO of Section 5.1,
Section 53.3 and Section 64 together may leave the impression that
it is grounded on all three provisions, and that may very well have
been the intention of the SEC. Assuming that is so, it is legally
impermissible for the SEC to have utilized both Section 53.3 and
Section 64 as basis for the CDO at the same time. The CDO under
Section 53.3 is premised on distinctly different requisites than the
CDO under Section 64. Even more crucially, the lifetime of the CDO
under Section 53.3 is confined to a definite span of ten (10) days,

which is not the case with the CDO under Section 64. This CDO
under Section 64 may be the object of a formal request for lifting
within five (5) days from its issuance, a remedy not expressly
afforded to the CDO under Section 53.3. Any respondent to a CDO
which cites both Section 53.3 and Section 64 would not have an
intelligent or adequate basis to respond to the same. Such
respondent would not know whether the CDO would have a
determinate lifespan of ten (10) days, as in Section 53.3, or would
necessitate a formal request for lifting within five (5) days, as
required under Section 64.1. This lack of clarity is to the obvious
prejudice of the respondent, and is in clear defiance of the
constitutional right to due process of law. Indeed, the veritable
mélange that the assailed CDO is, with its jumbled mixture of
premises and conclusions, the antithesis of due process.
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Division)
Same; Same; Same; Same; Same; Same; Same; Same; In view

of the statutory differences among the three Cease and Desist Orders
(CDOs) under the Securities Regulation Code (SRC), it is essential
that the Securities and Exchange Commission (SEC), in issuing
such injunctive relief, identify the exact provision of the SRC on
which the CDO is founded. Only by doing so could the adversely
affected party be able to properly evaluate whatever his responses
under the law.·Had the CDO issued by the SEC expressed the
length of its term, perhaps greater clarity would have been offered
on what Section of the SRC it is based. However, the CDO is
precisely silent as to its lifetime, thereby precluding much needed
clarification. In view of the statutory differences among the three
CDOs under the SRC, it is essential that the SEC, in issuing such
injunctive relief, identify the exact provision of the SRC on which
the CDO is founded. Only by doing so could the adversely affected
party be able to properly evaluate whatever his responses under the
law.
Same; Same; Same; Same; Same; Same; Same; Same; The fact
that the Cease and Desist Order (CDO) was signed, much less
apparently deliberated upon, by only by one commissioner likewise

renders the order fatally infirm·the Securities and Exchange
Commission (SEC) is a collegial body composed of a Chairperson
and four (4) Commissioners, in which the presence of at least three
(3) Commissioners is required to constitute a quorum to conduct
business.·To make matters worse for the SEC, the fact that the
CDO was signed, much less apparently deliberated upon, by only by
one commissioner likewise renders the order fatally infirm. The
SEC is a collegial body composed of a Chairperson and four (4)
Commissioners. In order to constitute a quorum to conduct
business, the presence of at least three (3) Commissioners is
required. In the leading case of GMCR v. Bell, 271 SCRA 790 (1997)
we definitively explained the nature of a collegial body, and how the
act of one member of such body, even if the head, could not be
considered as that of the entire body itself.
Same; Same; Same; Same; Same; Same; Same; Same; If it has
not been clear to the Securities and Exchange Commission (SEC)
before, it should be clear now that its power to issue a Cease and
Desist Order (CDO) can not, under the Securities Regulation Code
(SRC), be delegated to an individual commissioner.·It is clear
under Section 4.6 that the ability to delegate functions to a single
commissioner does not extend to the exercise of the review or
appellate
688

Division)
authority of the SEC. The issuance of the CDO is an act of the SEC
itself done in the exercise of its original jurisdiction to review actual
cases or controversies. If it has not been clear to the SEC before, it
should be clear now that its power to issue a CDO can not, under
the SRC, be delegated to an individual commissioner.
Office of the Government Corporate Counsel (OGCC); Attorneys;
Government Service Insurance System (GSIS); The charter of
Government Service Insurance System (GSIS) is unique among
government owned or controlled corporations with original charter
in that it allocates a role for its internal legal counsel that is in
conjunction with or complementary to the Office of the Government

Corporate Counsel (OGCC), which is the statutory legal counsel for
Government-Owned or -Controlled Corporations (GOCCs).·We turn
to the sanction on the lawyers of GSIS imposed by the Court of
Appeals. Nonetheless, we find that as a matter of law the sanctions
are unwarranted. The charter of GSIS is unique among government
owned or controlled corporations with original charter in that it
allocates a role for its internal legal counsel that is in conjunction
with or complementary to the Office of the Government Corporate
Counsel (OGCC), which is the statutory legal counsel for GOCCs.
Same; Same; Same; Irrepealable Laws; Congress is not bound to
retain the Office of the Government Corporate Counsel (OGCC) as
the primary or exclusive legal counsel of Government Service
Insurance System (GSIS) even if it performs such a role for other
Government-Owned or -Controlled Corporations (GOCCs)·to bind
Congress to perform in that manner would be akin to elevating the
Office of the Government Corporate CounselÊs (OGCCÊs) statutory
role to irrepealable status, and it is basic that Congress is barred
from passing irrepealable laws.·The designation of the OGCC as
the legal counsel for GOCCs is set forth by statute, initially by Rep.
Act No. 3838, then reiterated by the Administrative Code of 1987.
Given that the designation is statutory in nature, there is no
impediment for Congress to impose a different role for the OGCC
with respect to particular GOCCs it may charter. Congress appears
to have done so with respect to GSIS, designating the OGCC as a
„legal adviser and consultant,‰ rather than as counsel to GSIS.
Further, the law clearly vests unto GSIS the discretion, rather than
the duty, to assign cases to the OGCC for legal action, while
designating the present legal services group of GSIS as „in-house
legal counsel.‰ This situates
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Division)
GSIS differently from the Land Bank of the Philippines, whose own
in-house lawyers have persistently argued before this Court to no
avail on their alleged right to file petitions before us instead of the
OGCC. Nothing in the Land Bank charter vested it with the
discretion to choose when to assign cases to the OGCC,

notwithstanding the establishment of its own Legal Department.
Congress is not bound to retain the OGCC as the primary or
exclusive legal counsel of GSIS even if it performs such a role for
other GOCCs. To bind Congress to perform in that manner would be
akin to elevating the OGCCÊs statutory role to irrepealable status,
and it is basic that Congress is barred from passing irrepealable
laws.
Courts; Judges; While due punishment has been meted on the
errant magistrates, the corporate world may very well be reminded
that the members of the judiciary are not to be viewed or treated as
mere pawns or puppets in the internecine fights businessmen and
their associates wage against other businessmen in the quest for
corporate dominance.·We close by acknowledging that the
surrounding circumstances behind these petitions are unfortunate,
given the events as narrated in A.M. No. 08-8-11-CA. While due
punishment has been meted on the errant magistrates, the
corporate world may very well be reminded that the members of the
judiciary are not to be viewed or treated as mere pawns or puppets
in the internecine fights businessmen and their associates wage
against other businessmen in the quest for corporate dominance. In
the end, the petitions did afford this Court to clarify consequential
points of law, points rooted in principles which will endure long
after the names of the participants in these cases have been
forgotten.
SPECIAL CIVIL ACTION in the Supreme Court.

Certiorari and Prohibition.
The facts are stated in the opinion of the Court.
Rodolfo R. Waga, Jr. for respondent Ibañez and Puno.
Villaraza, Cruz, Marcelo & Angangco and Quiason,
Makalintal, Barot, Torres, Ibarra & Sison co-counsels for
respondents Anthony V. Rosete, et al.
690

(Eighth Division)
Tinga, J.:
These are the undisputed facts.

The annual stockholdersÊ meeting (annual meeting) of
the Manila Electric Company (Meralco) was scheduled on
27 May 2008.1 In connection with the annual meeting,
proxies2 were required to be submitted on or before 17 May
2008, and the proxy validation was slated for five days
later, or 22 May.3
In view of the resignation of Camilo Quiason,4 the
position of corporate secretary of Meralco became vacant.5
On 15 May 2008, the board of directors of Meralco
designated Jose Vitug6 to act as corporate secretary for the
annual meeting.7 However, when the proxy validation
began on 22 May, the proceedings were presided over by
respondent Anthony Rosete (Rosete), assistant corporate
secretary and in-house chief legal counsel of Meralco.8
Private respondents nonetheless argue that Rosete was the
acting corporate secretary of Me-ralco.9 Petitioner
Government Service Insurance System (GSIS), a major
shareholder in Meralco, was distressed over the proxy
validation proceedings, and the resulting certification of
proxies in favor of the Meralco management.10
On 23 May 2008, GSIS filed a complaint with the
Regional Trial Court (RTC) of Pasay City, docketed as R-
PSY-08-
_______________
1 Rollo (G.R. No. 183905) (hereinafter, „Rollo‰), pp. 24, 884.

2 See Corporation Code, Sec. 58.
3 Rollo, pp. 24, 889.
4 Retired Associate Justice of the Supreme Court.
5 Rollo, pp. 24, 886.
6 Also a retired Associate Justice of this Court.
7 Rollo, pp. 24, 886.
8 Id., at pp. 24, 893. Petitioner alleges that Justice Vitug had
tendered his resignation on the previous day, 21 May 2008, see id., at p.
24, but that this was not formally accepted by the Meralco board of
directors until 26 May 2008, see id., at p. 25.
9 Id., at p. 893.
10 Id., at pp. 25-26, 893-896.
691
VOL. 585, APRIL 16, 2009 691

(Eighth Division)
05777-C4 seeking the declaration of certain proxies as

invalid.11 Three days later, on 26 May, GSIS filed a Notice
with the RTC manifesting the dismissal of the complaint.12
On the same day, GSIS filed an Urgent Petition13 with the
Securities and Exchange Commission (SEC) seeking to
restrain Rosete from „recognizing, counting and tabulating,
directly or indirectly, notionally or actually or in whatever
way, form, manner or means, or otherwise honoring the
shares covered by‰ the proxies in favor of respondents
Manuel Lopez,14 Felipe Alfonso,15 Jesus Francisco,16 Oscar
Lopez, Christian Monsod,17 Elpidio Ibañez,18 Francisco
Giles-Puno19 „or any officer representing MERALCO
Management,‰ and to annul and declare invalid said
proxies.20 GSIS also prayed for the issuance of a Cease and
Desist Order (CDO) to restrain the use of said proxies
during the annual meeting scheduled for the following
day.21 A CDO22 to that effect signed by SEC Commissioner
_______________
11 Id., at pp. 26, 896.
12 Id., at pp. 159-160, 899.
13 The records do not show that the petition was given a docket
number.
14 Chairman of the Board of Directors and Chief Executive Officer of
Meralco. See Rollo, p. 20.
15 Identified by GSIS in its petition as President and Chief Operating
Officer of Meralco, and also a member of the Meralco board of directors.
See id.
16 Also identified by GSIS in its petition as President and Chief
Operating Officer of Meralco, and also a member of the Meralco board of
directors. See id.
17 A member of the board of directors of Meralco. See id., at p. 21.
18 President and Chief Operating Office of First Philippine Holdings
Corporation. See id.
19 Chief Finance Officer, Treasurer, and Executive Vice President,
First Philippine Holdings Corporation. See id.
20 Id., at pp. 182-183. The available records do not indicate that the
petition filed with the SEC was ever supplied its own case number.
21 Id., at p. 193.
22 Id., at pp. 185-191.
692

(Eighth Division)
Jesus Martinez was issued on 26 May 2008, the same day

the complaint was filed. During the annual meeting held on
the following day, Rosete announced that the meeting
would push through, expressing the opinion that the CDO
is null and void.23
On 28 May 2008, the SEC issued a Show Cause Order
(SCO)24 against private respondents, ordering them to
appear before the Commission on 30 May 2008 and explain
why they should not be cited in contempt. On 29 May 2008,
respondents filed a petition for certiorari with prohibition25
with the Court of Appeals, praying that the CDO and the
SCO be annulled. The petition was docketed as CA-G.R. SP
No. 103692.
Many developments involving the Court of AppealsÊ
handling of CA-G.R. SP No. 103692 and the conduct of
several of its individual justices are recounted in our
Resolution dated 9 September 2008 in A.M. No. 08-8-11-CA
(Re: Letter Of Presiding Justice Conrado M. Vasquez, Jr. On
CA-G.R. SP No. 103692).26 On 23 July 2008, the Court of
Appeals Eighth Division promulgated a decision in the case
with the following dispositive portion:
„WHEREFORE, premises considered, the May 26, 2008

complaint filed by GSIS in the SEC is hereby DISMISSED due to
SECÊs lack of jurisdiction, due to forum shopping by respondent
GSIS, and due to splitting of causes of action by respondent GSIS.
Consequently, the SECÊs undated cease and desist order and the
SECÊs May 28, 2008 show cause order are hereby DECLARED
VOID AB INITIO and without legal effect and their implementation
are hereby permanently restrained.
_______________
23 Id., at pp. 28, 903-905.
24 Id., at pp. 192-193.

25 Id., at pp. 194-251.
26 See http://sc.judiciary.gov.ph/jurisprudence/2008/october2008/08-8-11-
CA.htm for Resolution as published in the Supreme Court website.
693
VOL. 585, APRIL 16, 2009 693

Division)
The May 26, 2008 complaint filed by GSIS in the SEC is hereby
barred from being considered, out of equitable considerations, as an
election contest in the RTC, because the prescriptive period of 15
days from the May 27, 2008 Meralco election to file an election
contest in the RTC had already run its course, pursuant to Sec. 3,
Rule 6 of the interim Rules of Procedure Governing Intra-Corporate
Controversies under R.A. No. 8799, due to deliberate act of GSIS in
filing a complaint in the SEC instead of the RTC.
Let seventeen (17) copies of this decision be officially
TRANSMITTED to the Office of the Chief Justice and three (3)
copies to the Office of the Court Administrator:
(1) for sanction by the Supreme Court against the „GSIS
LAW OFFICE‰ for unauthorized practice of law,
(2) for sanction and discipline by the Supreme Court of
GSIS lawyers led by Atty. Estrella Elamparo-Tayag, Atty.
Marcial C. Pimentel, Atty. Enrique L. Tandan III, and other
GSIS lawyers for violation of Sec. 27 of Rule 138 of the
Revised Rules of Court, pursuant to Santayana v. Alampay,
A.C. No. 5878, March 21, 2005 454 SCRA 1, and pursuant to
Land Bank of the Philippines v. Raymunda Martinez, G.R.
No. 169008, August 14, 2007, 530 SCRA 158:
(a) for violating express provisions of law and
defying public policy in deliberately displacing the
Office of the Government Corporate Counsel (OGCC)
from its duty as the exclusive lawyer of GSIS, a
government owned and controlled corporation (GOCC),
by admittedly filing and defending cases as well as
appearing as counsel for GSIS, without authority to do
so, the authority belonging exclusively to the OGCC;
(b) for violating the lawyerÊs oath for failing in
their duty to act as faithful officers of the court by
engaging in forum shopping;

(c) for violating express provisions of law most
especially those on jurisdiction which are mandatory;
and
(d) for violating Sec. 3, Rule 2 of the 1997 Rules of
Civil Procedure by deliberately splitting causes of
action in order to file multiple complaints: (i) in the
RTC of
694

Division)
Pasay City and (ii) in the SEC, in order to ensure a

favorable order.‰27
The promulgation of the said decision provoked a

searing controversy, as detailed in our Resolution in A.M.
No. 08-8-11-CA. Nonetheless, the appellate courtÊs decision
spawned three different actions docketed with their own
case numbers before this Court. One of them, G.R. No.
183933, was initiated by a Motion for Extension of Time to
File Petition for Review filed by the Office of the Solicitor
General (OSG) in behalf of the SEC, Commissioner
Martinez in his capacity as officer-in-charge of the SEC,
and Hubert Guevarra in his capacity as Director of the
Compliance and Enforcement Department of the SEC.28
However, the OSG did not follow through with the filing of
the petition for review adverted to; thus, on 19 January
2009, the Court resolved to declare G.R. No. 183933 closed
and terminated.29
The two remaining cases before us are docketed as G.R.
No. 183905 and 184275. G.R. No. 183905 pertains to a
petition for certiorari and prohibition filed by GSIS, against
the Court of Appeals, and respondents Rosete, Lopez,
Alfonso, Francisco, Monsod, Ibañez and Puno, all of whom
serve in different corporate capacities with Meralco or First
Philippines Holdings Corporation, a major stockholder of
Meralco and an affiliate of the Lopez Group of Companies.
This petition seeks of the Court to declare the 23 July 2008
decision of the Court of Appeals null and void, affirm the
SECÊs jurisdiction over the petition filed before it by GSIS,

and pronounce that the CDO and the SCO orders are valid.
This petition was filed in behalf of GSIS by the „GSIS Law
Office‰; it was signed by the Chief Legal Counsel and
Assistant Legal Counsel of GSIS, and
_______________
27 Rollo, pp. 141-142.
28 See id., at p. 2200.
29 Id., at p. 2201.
695
VOL. 585, APRIL 16, 2009 695

(Eighth Division)
three self-identified „Attorney[s],‰ presumably holding

lawyer positions in GSIS.30
The OSG also filed the other petition, docketed as G.R.
No. 184275. It identifies as its petitioners the SEC,
Commissioner Martinez in his capacity as OIC of the SEC,
and Hubert Guevarra in his capacity as Director of the
Compliance and Enforcement Department of the SEC·the
same petitioners in the aborted petition for review initially
docketed as G.R. No. 183933. Unlike what was adverted to
in the motion for extension filed by the same petitioners in
G.R. No. 183933, the petition in G.R. No. 184275 is one for
certiorari under Rule 65 as indicated on page 3 thereof,31
and not a petition for review. Interestingly, save for the
first page which leaves the docket number blank, all 86
pages of this petition for certiorari carry a header wrongly
identifying the pleading as the non-existent petition for
review under G.R. No. 183933. This petition seeks the
„reversal‰ of the assailed decision of the Court of Appeals,
the recognition of the jurisdiction of the SEC over the
petition of GSIS, and the affirmation of the CDO and SCO.
I.
Private respondents seek the expunction of the petition
filed by the SEC in G.R. No. 184275. We agree that the
petitioners therein, namely: the SEC, Commissioner
Marquez and Guevarra, are not real parties-in-interest to

the dispute and thus bereft of capacity to file the petition.
By way of simple illustration, to argue otherwise is to say
that the trial court judge, the National Labor Relations
Commission, or any quasi-judicial agency has the right to
seek the review of an appellate court decision reversing any
of their rulings. That prospect, as any serious student of
remedial law knows, is zero.
_______________
30 Id., at p. 80.
31 „This is a petition for certiorari under Rule 65 of the Revised Rules
of Court x x x.‰ Rollo (G.R. No. 184275), p. 4.
696

(Eighth Division)
The Court, through the Resolution of the Third Division

dated 2 September 2008, had resolved to treat the petition
in G.R. No. 184275 as a petition for review on certiorari,
but withheld giving due course to it.32 Under Section 1 of
Rule 45, which governs appeals by certiorari, the right to
file the appeal is restricted to „a party,‰ meaning that only
the real parties-in-interest who litigated the petition for
certiorari before the Court of Appeals are entitled to appeal
the same under Rule 45. The SEC and its two officers may
have been designated as respondents in the petition for
certiorari filed with the Court of Appeals, but under
Section 5 of Rule 65 they are not entitled to be classified as
real parties-in-interest. Under the provision, the judge,
court, quasi-judicial agency, tribunal, corporation, board,
officer or person to whom grave abuse of discretion is
imputed (the SEC and its two officers in this case) are
denominated only as public respondents. The provision
further states that „public respondents shall not appear in
or file an answer or comment to the petition or any
pleading therein.‰33 Justice Regalado explains:
„[R]ule 65 involves an original special civil action specifically
directed against the person, court, agency or party a quo which had
committed not only a mistake of judgment but an error of
jurisdiction, hence should be made public respondents in that action
brought to nullify their invalid acts. It shall, however be the duty of
the party litigant, whether in an appeal under Rule 45 or in a
special civil action in Rule 65, to defend in his behalf and the party
whose adjudication is assailed, as he is the one interested in
sustaining the correctness of the disposition or the validity of the
proceedings.
xxx The party interested in sustaining the proceedings in the
lower court must be joined as a co-respondent and he has the duty
to defend in his own behalf and in behalf of the court which
rendered the questioned order. While there is nothing in the Rules
that prohibit the presiding judge of the court involved from filing
his own answer and defending his questioned order, the Supreme
Court
_______________
32 Id., at p. 377.
33 See Rule 65, Sec. 5.
697
VOL. 585, APRIL 16, 2009 697

Division)
has reminded judges of the lower courts to refrain from

doing so unless ordered by the Supreme Court.[34] The
judicial norm or mode of conduct to be observed in trial and
appellate courts is now prescribed in the second paragraph
of this section.
xxx
A person not a party to the proceedings in the trial court
or in the Court of Appeals cannot maintain an action for
certiorari in the Supreme Court to have the judgment
reviewed.‰35
Rule 65 does recognize that the SEC and its officers

should have been designated as public respondents in the
petition for certiorari filed with the Court of Appeals. Yet
their involvement in the instant petition is not as original
party-litigants, but as the quasi-judicial agency and officers

exercising the adjudicative functions over the dispute
between the two contending factions within Meralco. From
the onset, neither the SEC nor Martinez or Guevarra has
been considered as a real party-in-interest. Section 2, Rule
3 of the 1997 Rules of Civil Procedure provides that every
action must be prosecuted or defended in the name of the
real party in interest, that is „the party who stands to be
benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.‰ It would be
facetious to assume that the SEC had any real interest or
stake in the intra-corporate dispute within Meralco.
We find our ruling in Hon. Santiago v. Court of
Appeals36 quite apposite to the question at hand. Petitioner
therein, a trial court judge, had presided over an
expropriation case. The litigants had arrived at an
amicable settlement, but the judge refused to approve the
same, even declaring it invalid.
_______________
34 Citing Turqueza v. Hernando, et al., G.R. No. 51626, 30 April 1980,
97 SCRA 483.
35 F. Regalado, I Remedial Law Compendium (1999 ed.) at pp. 723-
724.
36 G.R. No. 46845, 27 April 1990, 184 SCRA 690.
698

(Eighth Division)
The matter was elevated to the Court of Appeals, which

promptly reversed the trial court and approved the
amicable settlement. The judge took the extraordinary step
of filing in his own behalf a petition for review on certiorari
with this Court, assailing the decision of the Court of
Appeals which had reversed him. In disallowing the judgeÊs
petition, the Court explained:
„While the issue in the Court of Appeals and that raised by

petitioner now is whether the latter abused his discretion in
nullifying the deeds of sale and in proceeding with the

expropriation proceeding, that question is eclipsed by the concern of
whether Judge Pedro T. Santiago may file this petition at all.
And the answer must be in the negative, Section 1 of Rule
45 allows a party to appeal by certiorari from a judgment of
the Court of Appeals by filing with this Court a petition for
review on certiorari. But petitioner judge was not a party
either in the expropriation proceeding or in the certiorari
proceeding in the Court of Appeals. His being named as
respondent in the Court of Appeals was merely to comply
with the rule that in original petitions for certiorari, the
court or the judge, in his capacity as such, should be named
as party respondent because the question in such a
proceeding is the jurisdiction of the court itself (See Mayol v.
Blanco, 61 Phil. 547 [19351, cited in Comments on the Rules of
Court, Moran, Vol. II, 1979 ed., p. 471). „In special proceedings,
the judge whose order is under attack is merely a nominal
party; wherefore, a judge in his official capacity, should not
be made to appear as a party seeking reversal of a decision
that is unfavorable to the action taken by him. A decent
regard for the judicial hierarchy bars a judge from suing
against the adverse opinion of a higher court,. . . .‰ (Alcasid v.
Samson, 102 Phil. 785, 740 [1957])
ACCORDINGLY, this petition is DENIED for lack of legal
capacity to sue by the petitioner.‰37
_______________
37 Id., at pp. 692-693.
699
VOL. 585, APRIL 16, 2009 699

(Eighth Division)
Justice Isagani Cruz added, in a Concurring Opinion in

Santiago: „The judge is not an active combatant in such
proceeding and must leave it to the parties themselves to
argue their respective positions and for the appellate court
to rule on the matter without his participation.‰38
Note that in Santiago, the Court recognized the good
faith of the judge, who perceived the amicable settlement

„as a manifestly iniquitous and illegal contract.‰39 The SEC
could have similarly felt in good faith that the assailed
Court of Appeals decision had unduly impaired its
prerogatives or caused some degree of hurt to it. Yet
assuming that there are rights or prerogatives peculiar to
the SEC itself that the appellate court had countermanded,
these can be vindicated in the petition for certiorari filed by
GSIS, whose legal capacity to challenge the Court of
Appeals decision is without question. There simply is no
plausible reason for this Court to deviate from a time-
honored rule that preserves the purity of our judicial and
quasi-judicial offices to accommodate the SECÊs distrust
and resentment of the appellate courtÊs decision. The
expunction of the petition in G.R. No. 184275 is accordingly
in order.
At this point, only one petition remains·the petition for
certiorari filed by GSIS in G.R. No. 183905. Casting off the
uncritical and unimportant aspects, the two main issues for
adjudication are as follows: (1) whether the SEC has
jurisdiction over the petition filed by GSIS against private
respondents; and (2) whether the CDO and SCO issued by
the SEC are valid.
II.
It is our resolute inclination that this case, which raises

interesting questions of law, be decided solely on the
merits, without regard to the personalities involved or the
well-
_______________
38 Id., at p. 693, J. Cruz, concurring.
39 Id., at p. 692.
700

(Eighth Division)
reported drama preceding the petition. To that end, the
Court has taken note of reports in the media that GSIS and
the Lopez group have taken positive steps to divest or
significantly reduce their respective interests in Meralco.40
These are developments that certainly ease the tension
surrounding this case, not to mention reason enough for
the two groups to make an internal reassessment of their
respective positions and interests in relation to this case.
Still, the key legal questions raised in the petition do not
depend at all on the identity of any of the parties, and
would obtain the same denouement even if this case was
lodged by unknowns as petitioners against similarly
obscure respondents.
With the objective to resolve the key questions of law
raised in the petition, some of the issues raised diminish as
peripheral. For example, petitioners raise arguments tied
to the behavior of individual justices of the Court of
Appeals, particularly former Justice Vicente Roxas, in
relation to this case as it was pending before the appellate
court. The Court takes cognizance of our Resolution in A.M.
No. 08-8-11-CA dated 9 September 2008, which duly recited
the various anomalous or unbecoming acts in relation to
this case performed by two of the justices who decided the
case in behalf of the Court of Appeals·former Justice
Roxas (the ponente) and Justice Bienvenido L. Reyes (the
Chairman of the 8th Division)·as well as three other
members of the Court of Appeals. At the same time, the
consensus of the Court as it deliberated on A.M. No. 08-8-
11-CA was to reserve comment or conclusion on the
assailed decision of the Court of Appeals, in recognition of
the reality that however stigmatized the actions and
motivations of Justice Roxas are, the decision is still the
_______________
40 See e.g., Philippine StarÊs and Daily InquirerÊs issues of 28 October
2008, reporting that GSIS had sold its remaining 27% stake in Meralco
to San Miguel Corp. for P30 billion, and issues of 14 March 2009
reporting that the PLDT Group had acquired a 20% stake of the Lopez
Group in Meralco for P20.07 billion increasing the formerÊs stake to
30.17% and reducing the latterÊs stake to 13.4%.
701
VOL. 585, APRIL 16, 2009 701

(Eighth Division)
product of the Court of Appeals as a collegial judicial body,

and not of one or some rogue justices. The penalties levied
by the Court on these appellate court justices, in our
estimation, redress the unwholesome acts which they had
committed. At the same time, given the jurisprudential
importance of the questions of law raised in the petition,
any result reached without squarely addressing such
questions would be unsatisfactory, perhaps derelict even.
III.
We now examine whether the SEC has jurisdiction over

the petition filed by GSIS. To recall, SEC has sought to
enjoin the use and annul the validation, of the proxies
issued in favor of several of the private respondents,
particularly in connection with the annual meeting.
A.
Jurisdiction is conferred by no other source but law.

Both sides have relied upon provisions of Rep. Act No.
8799, otherwise known as the Securities Regulation Code
(SRC), its implementing rules (Amended Implementing
Rules or AIRR-SRC), and other related rules to support
their competing contentions that either the SEC or the trial
courts has exclusive original jurisdiction over the dispute.
GSIS primarily anchors its argument on two correlated
provisions of the SRC. These are Section 53.1 and Section
20.1, which we cite:
„SEC. 53. Investigations, Injunctions and Prosecution of

Offenses.·53.1. The Commission may, in its discretion, make
such investigations as it deems necessary to determine
whether any person has violated or is about to violate any
provision of this Code, any rule, regulation or order
thereunder, or any rule of an Exchange, registered
securities association, clearing agency, other self-regulatory
organization, and may require or permit any person to file with it
a statement in writing,
702

Division)
under oath or otherwise, as the Commission shall determine, as to

all facts and circumstances concerning the matter to be
investigated. The Commission may publish information concerning
any such violations, and to investigate any fact, condition,
practice or matter which it may deem necessary or proper
to aid in the enforcement of the provisions of this Code, in
the prescribing of rules and regulations thereunder, or in
securing information to serve as a basis for recommending
further legislation concerning the matters to which this
Code relates: xxx (emphasis supplied)
SEC. 20. Proxy Solicitations.·20.1. Proxies must be issued and
proxy solicitation must be made in accordance with rules and
regulations to be issued by the Commission;‰
The argument, stripped of extravagance, is that since

proxy solicitations following Section 20.1 have to be made
in accordance with rules and regulations issued by the
SEC, it is the SEC under Section 53.1 that has the
jurisdiction to investigate alleged violations of the rules on
proxy solicitations. The GSIS petition invoked AIRR-SRC
Rule 20, otherwise known as „The Proxy Rule,‰ which
enumerates the requirements as to form of proxy and
delivery of information to security holders. According to
GSIS, the information statement Meralco had filed with
the SEC in connection with the annual meeting did not
contain any proxy form as required under AIRR-SRC Rule
20.
On the other hand, private respondents argue before us
that under Section 5.2 of the SRC, the SECÊs jurisdiction
over all cases enumerated in Section 5 of Presidential
Decree No. 902-A was transferred to the courts of general
jurisdiction or the appropriate regional trial court. The two
particular classes of cases in the enumeration under
Section 5 of Presidential Decree No. 902-A which private
respondents especially refer to are as follows:
„xxx
(2) Controversies arising out of intra-corporate, partnership, or
association relations, between and among stockholders, members,
703
VOL. 585, APRIL 16, 2009 703

Division)
or associates; or association of which they are stockholders,

members, or associates, respectively;
(3) Controversies in the election or appointment of directors,
trustees, officers or managers of corporations, partnerships, or
associations;
xxx‰
In addition, private respondents cite the Interim Rules

on Intra-Corporate Controversies (Interim Rules)
promulgated by this Court in 2001, most pertinently,
Section 2 of Rule 6 (on Election Contests), which defines
„election contests‰ as follows:
„SEC. 2. Definition.·An election contest refers to any

controversy or dispute involving title or claim to any elective office
in a stock or nonstock corporation, the validation of proxies, the
manner and validity of elections and the qualifications of
candidates, including the proclamation of winners, to the office of
director, trustee or other officer directly elected by the stockholders
in a close corporation or by members of a nonstock corporation
where the articles of incorporation or bylaws so provide.‰ (emphasis
supplied)
The correct answer is not clear-cut, but there is one. In

private respondentsÊ favor, the provisions of law they cite
pertain directly and exclusively to the statutory jurisdiction
of trial courts acquired by virtue of the transfer of
jurisdiction following the passage of the SRC. In contrast,
the SRC provisions relied upon by GSIS do not
immediately or directly establish that bodyÊs jurisdiction
over the petition, since it necessitates the linkage of
Section 20 to Section 53.1 of the SRC before the point can
bear on us.
On the other hand, the distinction between „proxy

solicitation‰ and „proxy validation‰ cannot be dismissed
offhand. The right of a stockholder to vote by proxy is
generally established by the Corporation Code,41 but it is
the SRC which specifically
_______________
41 See Corporation Code, Sec. 24, which reads in part: „xxx In stock
corporations, every stockholder entitled to vote shall have the
704

(Eighth Division)
regulates the form and use of proxies, more particularly the

procedure of proxy solicitation, primarily through Section
20.42 AIRR-SRC Rule 20 defines the terms solicit and
solicitation:
„The terms solicit and solicitation include:

A. any request for a proxy whether or not accompanied
by or included in a form of proxy
B. any request to execute or not to execute, or to revoke,
a proxy; or
C. the furnishing of a form of proxy or other
communication to security holders under circumstance
reasonably calculated to result in the procurement,
withholding or revocation of a proxy.‰
It is plain that proxy solicitation is a procedure that

antecedes proxy validation. The former involves the
securing and submission of proxies, while the latter
concerns the validation of such secured and submitted
proxies. GSIS raises the sensible point that there was no
election yet at the time it filed its petition with the SEC,
hence no proper election contest or controversy yet over
which the regular courts may have jurisdiction. And the
point ties its cause of action to alleged irregularities in the
proxy solicitation procedure, a process that precedes either
the validation of proxies or the annual meeting itself.
_______________
right to vote in person or by proxy the number of shares of stock standing
xxx,‰ and Section 58, which states: „Proxies.·Stockholders and members
may vote in person or by proxy in all meetings of stockholders or
members. Proxies shall be in writing, signed by the stockholder or
member and field before the scheduled meeting with the corporate
secretary. Unless otherwise provided in the proxy, it shall be valid only
for the meeting for which it is intended. No proxy shall be valid and
effective for a period longer than five (5) years at any one time.
42 The now-abrogated Revised Securities Act had also imposed
limitations on the use of proxies. See Sec. 34, Revised Securities Act.
705
VOL. 585, APRIL 16, 2009 705

(Eighth Division)
Under Section 20.1, the solicitation of proxies must be in

accordance with rules and regulations issued by the SEC,
such as AIRR-SRC Rule 4. And by virtue of Section 53.1,
the SEC has the discretion „to make such investigations as
it deems necessary to determine whether any person has
violated‰ any rule issued by it, such as AIRR-SRC Rule 4.
The investigatory power of the SEC established by Section
53.1 is central to its regulatory authority, most crucial to
the public interest especially as it may pertain to
corporations with publicly traded shares. For that reason,
we are not keen on pursuing private respondentsÊ
insistence that the GSIS complaint be viewed as rooted in
an intra-corporate controversy solely within the
jurisdiction of the trial courts to decide. It is possible that
an intra-corporate controversy may animate a disgruntled
shareholder to complain to the SEC a corporationÊs
violations of SEC rules and regulations, but that motive
alone should not be sufficient to deprive the SEC of its
investigatory and regulatory powers, especially so since
such powers are exercisable on a motu proprio basis.
At the same time, Meralco raises the substantial point
that nothing in the SRC empowers the SEC to annul or
invalidate improper proxies issued in contravention of
Section 20. It cites that the penalties defined by the SEC
itself for violation of Section 20 or AIRR-SRC Rule 20 are

limited to a reprimand/warning for the first offense, and
pecuniary fines for succeeding offenses.43 Indeed, if the
SEC does not have the power to invalidate proxies solicited
in violation of its promulgated rules, serious questions may
be raised whether it has the power to adjudicate claims of
violation in the first place, since the relief it may extend
does not directly redress the cause of action of the
complainant seeking the exclusion of the proxies.
_______________
43 Rollo, p. 933; citing SEC Memorandum Circular No. 6, Series of
2005, which may also be found at
http://www.sec.gov.ph/circulars/cy,2005/sec-memo-6,s2005.pdf (Last
visited, 8 April 2009).
706

(Eighth Division)
There is an interesting point, which neither party raises,

and it concerns Section 6(g) of Presidential Decree No. 902-
A, which states:
„SEC. 6. In order to effectively exercise such jurisdiction, the

Commission shall possess the following powers:
xxx
(g) To pass upon the validity of the issuance and use of proxies
and voting trust agreements for absent stockholders or members;
xxx‰
As promulgated then, the provision would confer on the

SEC the power to adjudicate controversies relating not only
to proxy solicitation, but also to proxy validation. Should
the proposition hold true up to the present, the position of
GSIS would have merit, especially since Section 6 of
Presidential Decree No. 902-A was not expressly repealed
or abrogated by the SRC.44
Yet a closer reading of the provision indicates that such
power of the SEC then was incidental or ancillary to the
„exercise of such jurisdiction.‰ Note that Section 6 is

immediately preceded by Section 5, which originally
conferred on the SEC „original and exclusive jurisdiction to
hear and decide cases‰ involving „controversies in the
election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or
associations.‰ The cases referred to in Section 5 were
transferred from the jurisdiction of the SEC to the regular
courts with the passage of the SRC, specifically Section 5.2.
Thus, the SECÊs power to pass upon the validity of proxies
in relation to election controversies has effectively been
withdrawn, tied as it is to its abrogated jurisdictional
powers.
Based on the foregoing, it is evident that the linchpin in
deciding the question is whether or not the cause of action
of GSIS before the SEC is intimately tied to an election
contro-
_______________
44 See SRC, Sec. 76.
707
VOL. 585, APRIL 16, 2009 707

(Eighth Division)
versy, as defined under Section 5(c) of Presidential Decree

No. 902-A. To answer that, we need to properly ascertain
the scope of the power of trial courts to resolve
controversies in corporate elections.
B.
Shares of stock in corporations may be divided into

voting shares and non-voting shares, which are generally
issued as „preferred‰ or „redeemable‰ shares.45 Voting
rights are exercised during regular or special meetings of
stockholders; regular meetings to be held annually on a
fixed date, while special meetings may be held at any time
necessary or as provided in the by-laws, upon due notice.46
The Corporation Code provides for a whole range of
matters which can be voted upon by stockholders, including

a limited set on which even non-voting stockholders are
entitled to vote on.47 On any of these matters which may be
voted upon by stockholders, the proxy device is generally
available.48
Under Section 5(c) of Presidential Decree No. 902-A, in
relation to the SRC, the jurisdiction of the regular trial
courts with respect to election-related controversies is
specifically confined to „controversies in the election or
appointment of directors, trustees, officers or managers of
corporations, partnerships, or associations.‰ Evidently,
the jurisdiction of the regular courts over so-called
election contests or controversies under Section 5(c)
does not extend to every potential subject that may
be voted on by shareholders, but only to the election
of directors or trus-
_______________
45 Corporation Code, Sec. 6.
46 Corporation Code, Sec. 50.
47 See supra note 45.
48 See J. Campos & M. Campos, I Corporation Code of the Philippines
(1990 ed.) at p. 515.
708

(Eighth Division)
tees, in which stockholders are authorized to

participate under Section 24 of the Corporation
Code.49
This qualification allows for a useful distinction that
gives due effect to the statutory right of the SEC to
regulate proxy solicitation, and the statutory jurisdiction of
regular courts over election contests or controversies. The
power of the SEC to investigate violations of its rules on
proxy solicitation is unquestioned when proxies are
obtained to vote on matters unrelated to the cases
enumerated under Section 5 of Presidential Decree No.
902-A. However, when proxies are solicited in

relation to the election of corporate directors, the
resulting controversy, even if it ostensibly raised the
violation of the SEC rules on proxy solicitation,
should be properly seen as an election controversy
within the original and exclusive jurisdiction of the
trial courts by virtue of Section 5.2 of the SRC in
relation to Section 5(c) of Presidential Decree No.
902-A.
The conferment of original and exclusive jurisdiction on
the regular courts over such controversies in the election of
corporate directors must be seen as intended to confine to
one body the adjudication of all related claims and
controversy arising from the election of such directors. For
that reason, the afore-
_______________
49 This observation should be viewed as confined to Section 5(c) of
Pres. Decree No. 902-A alone. We are cognizant of potential arguments
over the use of proxies in relation to non-election related matters voted
upon by the stockholders when such matters concern intra-corporate
controversies as defined in Section 5(a) of Pres. Decree No. 902-A. It is
apparent that intra-corporate controversies fall within the jurisdiction of
the regular trial courts and that issues related to proxy voting that are
intimately related to intra-corporate controversies would necessarily fall
within such jurisdiction as well. Nonetheless, the precise jurisdictional
parameters with respect to Section 5(a) proxy-related issues are not
susceptible to allocation through this case, which involves an election-
related dispute under Section 5(c), and best await a more suitable case or
controversy.
709
VOL. 585, APRIL 16, 2009 709

(Eighth Division)
quoted Section 2, Rule 6 of the Interim Rules broadly

defines the term „election contest‰ as encompassing all
plausible incidents arising from the election of corporate
directors, including: (1) any controversy or dispute
involving title or claim to any elective office in a stock or

nonstock corporation, (2) the validation of proxies, (3)
the manner and validity of elections and (4) the
qualifications of candidates, including the proclamation of
winners. If all matters anteceding the holding of such
election which affect its manner and conduct, such as the
proxy solicitation process, are deemed within the original
and exclusive jurisdiction of the SEC, then the prospect of
overlapping and competing jurisdictions between that body
and the regular courts becomes frighteningly real. From
the language of Section 5(c) of Presidential Decree No. 902-
A, it is indubitable that controversies as to the qualification
of voting shares, or the validity of votes cast in favor of a
candidate for election to the board of directors are properly
cognizable and adjudicable by the regular courts exercising
original and exclusive jurisdiction over election cases.
Questions relating to the proper solicitation of proxies used
in such election are indisputably related to such issues, yet
if the position of GSIS were to be upheld, they would be
resolved by the SEC and not the regular courts, even if
they fall within „controversies in the election‰ of directors.
The Court recognizes that GSISÊs position flirts with the
abhorrent evil of split jurisdiction,50 allowing as it does
both the SEC and the regular courts to assert jurisdiction
over the same controversies surrounding an election
contest. Should the argument of GSIS be sustained, we
would be perpetually confronted with the spectacle of
election controversies being heard and adjudicated by both
the SEC and the regular courts, made possible through a
mere allegation that the
_______________
50 „[T]he Court has consistently refused to sanction split jurisdiction.‰
Southern Cross Cement Corporation v. Philcemcor, G.R. No. 158540, 8
July 2004, 434 SCRA 65; citing Associated Labor Union v. Gomez, et al.,
125 Phil. 717, 722; 19 SCRA 304, 309 (1967).
710

(Eighth Division)
anteceding proxy solicitation process was errant, but the

competing cases filed with one objective in mind·to affect
the outcome of the election of the board of directors. There
is no definitive statutory provision that expressly mandates
so untidy a framework, and we are disinclined to construe
the SRC in such a manner as to pave the way for the
splitting of jurisdiction.
Unlike either Section 20.1 or Section 53.1, which merely
alludes to the rule-making or investigatory power of the
SEC, Section 5 of Pres. Decree No. 902-A sets forth a
definitive rule on jurisdiction, expressly granting as it does
„original and exclusive jurisdiction‰ first to the SEC, and
now to the regular courts. The fact that the jurisdiction of
the regular courts under Section 5(c) is confined to the
voting on election of officers, and not on all matters which
may be voted upon by stockholders, elucidates that the
power of the SEC to regulate proxies remains extant and
could very well be exercised when stockholders vote on
matters other than the election of directors.
That the proxy challenge raised by GSIS relates to the
election of the directors of Meralco is undisputed. The
controversy was engendered by the looming annual
meeting, during which the stockholders of Meralco were to
elect the directors of the corporation. GSIS very well knew
of that fact. On 17 March 2008, the Meralco board of
directors adopted a board resolution stating:
„RESOLVED that the board of directors of the Manila Electric

Company (MERALCO) delegate, as it hereby delegates to the
Nomination & Governance Committee the authority to approve and
adopt appropriate rules on: (1) nomination of candidates for
election to the board of directors; (2) appreciation of ballots
during the election of members of the board of directors; and
(3) validation of proxies for regular or special meetings of the
stockholders.‰51
_______________
51 Rollo, p. 884. Emphasis supplied.
711
VOL. 585, APRIL 16, 2009 711

(Eighth Division)
In addition, the Information Statement/Proxy form filed by

First Philippine Holdings Corporation with the SEC
pursuant to Section 20 of the SRC, states:
REASON FOR SOLICITATION OF VOTES

„The Solicitor is soliciting proxies from stockholders of the
Company for the purpose of electing the directors named
under the subject headed ÂDirectorsÊ in this Statement as well
as to vote the matters in the agenda of the meeting as provided for
in the Information Statement of the Company. All of the nominees
are current directors of the Company.‰52
Under the circumstances, we do not see it feasible for

GSIS to posit that its challenge to the solicitation or
validation of proxies bore no relation at all to the scheduled
election of the board of directors of Meralco during the
annual meeting. GSIS very well knew that the controversy
falls within the contemplation of an election controversy
properly within the jurisdiction of the regular courts.
Otherwise, it would have never filed its original petition
with the RTC of Pasay. GSIS may have withdrawn its
petition with the RTC on a new assessment made in good
faith that the controversy falls within the jurisdiction of
the SEC, yet the reality is that the reassessment is
precisely wrong as a matter of law.
IV.
The lack of jurisdiction of the SEC over the subject

matter of GSISÊs petition necessarily invalidates the CDO
and SDO issued by that body. However, especially with
respect to the CDO, there is need for this Court to squarely
rule on the question pertaining to its validity, if only for
jurisprudential value and for the guidance of the SEC.
To recount the facts surrounding the issuance of the
CDO, GSIS filed its petition with the SEC on 26 May 2008.
The
_______________
52 Id., at p. 889. Emphasis supplied.
712

(Eighth Division)
CDO, six (6) pages in all with three (3) pages devoted to the
tenability of granting the injunctive relief, was issued on
the very same day, 26 May 2008, without notice or hearing.
The CDO bore the signature of Commissioner Jesus
Martinez, identified therein as „Officer-in-Charge,‰ and
nobody elseÊs.
The provisions of the SRC relevant to the issuance of a
CDO are as follows:
„SEC. 5. Powers and Functions of the Commission.·5.1. The

Commission shall act with transparency and shall have the powers
and functions provided by this Code, Presidential Decree No. 902-A,
the Corporation Code, the Investment Houses Law, the Financing
Company Act and other existing laws. Pursuant thereto the
Commission shall have, among others, the following powers and
functions:
xxx
(i) Issue cease and desist orders to prevent fraud or injury to
the investing public;
xxx
[SEC.] 53.3. Whenever it shall appear to the Commission that
any person has engaged or is about to engage in any act or practice
constituting a violation of any provision of this Code, any rule,
regulation or order thereunder, or any rule of an Exchange,
registered securities association, clearing agency or other self-
regulatory organization, it may issue an order to such person to
desist from committing such act or practice: Provided, however,
That the Commission shall not charge any person with violation of
the rules of an Exchange or other self regulatory organization
unless it appears to the Commission that such Exchange or other
self-regulatory organization is unable or unwilling to take action
against such person. After finding that such person has engaged in
any such act or practice and that there is a reasonable likelihood of
continuing, further or future violations by such person, the

Commission may issue ex parte a cease and desist order for a
maximum period of ten (10) days, enjoining the violation and
compelling compliance with such provision. The Commission may
transmit such evidence as may be available concerning any
violation of any provision of this Code, or any rule, regulation or
order thereunder, to the Department of
713
VOL. 585, APRIL 16, 2009 713

Division)
Justice, which may institute the appropriate criminal proceedings

under this Code.
SEC. 64. Cease and Desist Order.·64.1. The Commission,
after proper investigation or verification, motu proprio, or upon
verified complaint by any aggrieved party, may issue a cease and
desist order without the necessity of a prior hearing if in its
judgment the act or practice, unless restrained, will operate as a
fraud on investors or is otherwise likely to cause grave or
irreparable injury or prejudice to the investing public.
64.2. Until the Commission issues a cease and desist order, the
fact that an investigation has been initiated or that a complaint has
been filed, including the contents of the complaint, shall be
confidential. Upon issuance of a cease and desist order, the
Commission shall make public such order and a copy thereof shall
be immediately furnished to each person subject to the order.
64.3. Any person against whom a cease and desist order was
issued may, within five (5) days from receipt of the order, file a
formal request for a lifting thereof. Said request shall be set for
hearing by the Commission not later than fifteen (15) days from its
filing and the resolution thereof shall be made not later than ten
(10) days from the termination of the hearing. If the Commission
fails to resolve the request within the time herein prescribed, the
cease and desist order shall automatically be lifted.‰
There are three distinct bases for the issuance by the

SEC of the CDO. The first, allocated by Section 5(i), is
predicated on a necessity „to prevent fraud or injury to the
investing public.‰ No other requisite or detail is tied to this
CDO authorized under Section 5(i).
The second basis, found in Section 53.3, involves a

determination by the SEC that „any person has engaged or
is about to engage in any act or practice constituting a
violation of any provision of this Code, any rule, regulation
or order thereunder, or any rule of an Exchange, registered
securities association, clearing agency or other self-
regulatory organization.‰ The provision additionally
requires a finding that „there is a reasonable likelihood of
continuing [or engaging in] further or future violations by
such person.‰ The maximum duration of the CDO issued
under Section 53.3 is ten (10) days.
714

(Eighth Division)
The third basis for the issuance of a CDO is Section 64.

This CDO is founded on a determination of an act or
practice, which unless restrained, „will operate as a fraud
on investors or is otherwise likely to cause grave or
irreparable injury or prejudice to the investing public.‰
Section 64.1 plainly provides three segregate instances
upon which the SEC may issue the CDO under this
provision: (1) after proper investigation or verification, (2)
motu proprio, or (3) upon verified complaint by any
aggrieved party. While no lifetime is expressly specified for
the CDO under Section 64, the respondent to the CDO may
file a formal request for the lifting thereof, which the SEC
must hear within fifteen (15) days from filing and decide
within ten (10) days from the hearing.
It appears that the CDO under Section 5(i) is similar to
the CDO under Section 64.1. Both require a common
finding of a need to prevent fraud or injury to the investing
public. At the same time, no mention is made whether the
CDO defined under Section 5(i) may be issued ex parte,
while the CDO under Section 64.1 requires „grave and
irreparable‰ injury, language absent in Section 5(i).
Notwithstanding the similarities between Section 5(i) and
Section 64.1, it remains clear that the CDO issued under
Section 53.3 is a distinct creation from that under Section
64.
The Court of Appeals cited the CDO as having been
issued in violation of the constitutional provision on due
process, which requires both prior notice and prior
hearing.53 Yet interestingly, the CDO as contemplated in
Section 53.3 or in Section 64, may be issued „ex parte‰
(under Section 53.3) or „without necessity of hearing‰
(under Section 64.1). Nothing in these provisions impose a
requisite hearing before the CDO may be issued
thereunder. Nonetheless, there are identifiable requisite
actions on the part of the SEC that must be undertaken
before the CDO may be issued either under Section 53.3 or
Section 64. In the case of Section 53.3, the SEC must
_______________
53 Id., at p. 131.
715
VOL. 585, APRIL 16, 2009 715

(Eighth Division)
make two findings: (1) that such person has engaged in any
such act or practice, and (2) that there is a reasonable
likelihood of continuing, (or engaging in) further or future
violations by such person. In the case of Section 64, the
SEC must adjudge that the act, unless restrained, will
operate as a fraud on investors or is otherwise likely to
cause grave or irreparable injury or prejudice to the
investing public.‰
Noticeably, the CDO is not precisely clear whether it
was issued on the basis of Section 5.1, Section 53.3 or
Section 64 of the SRC. The CDO actually refers and cites
all three provisions, yet it is apparent that a singular CDO
could not be founded on Section 5.1, Section 53.3 and
Section 64 collectively. At the very least, the CDO under
Section 53.3 and under Section 64 have their respective
requisites and terms.
GSIS was similarly cagey in its petition before the SEC,
it demurring to state whether it was seeking the CDO
under Section 5.1, Section 53.3, or Section 64. Considering

that injunctive relief generally avails upon the showing of a
clear legal right to such relief, the inability or
unwillingness to lay bare the precise statutory basis for the
prayer for injunction is an obvious impediment to a
successful application. Nonetheless, the error of the SEC in
granting the CDO without stating which kind of CDO it
was issuing is more unpardonable, as it is an act that
contravenes due process of law.
We have particularly required, in administrative
proceedings, that the body or tribunal „in all controversial
questions, render its decision in such a manner that the
parties to the proceeding can know the various issues
involved, and the reason for the decision rendered.‰54 This
requirement is vital, as its fulfillment would afford the
adverse party the opportunity to interpose a reasoned and
intelligent appeal that is responsive to the grounds cited
against it. The CDO extended
_______________
54 Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, 642-644
(1940).
716

(Eighth Division)
by the SEC fails to provide the needed reasonable clarity of

the rationale behind its issuance.
The subject CDO first refers to Section 64, citing its
provisions, then stating: „[p]rescinding from the
aforequoted, there can be no doubt whatsoever that the
Commission is in fact mandated to take up, if expeditiously,
any verified complaint praying for the provisional remedy
of a cease and desist order.‰55 The CDO then discusses the
nature of the right of GSIS to obtain the CDO, as well as
„the urgent and paramount necessity to prevent serious
damage because the stockholdersÊ meeting is scheduled on
May 28, 2008 x x x‰ Had the CDO stopped there, the
unequivocal impression would have been that the order is

based on Section 64.
But the CDO goes on to cite Section 5.1, quoting
paragraphs (i) and (n) in full, ratiocinating that under
these provisions, the SEC had „the power to issue cease
and desist orders to prevent fraud or injury to the public
and such other measures necessary to carry out the
CommissionÊs role as regulator.‰56 Immediately thence, the
CDO cites Section 53.3 as providing „that whenever it shall
appear to the Commission that nay person has engaged or
is about to engage in any act or practice constituting a
violation of any provision, any rule, regulation or order
thereunder, the Commission may issue ex parte a cease and
desist order for a maximum period of ten (10) days,
enjoining the violation and compelling compliance
therewith.‰57
The citation in the CDO of Section 5.1, Section 53.3 and
Section 64 together may leave the impression that it is
grounded on all three provisions, and that may very well
have been the intention of the SEC. Assuming that is so, it
is legally impermissible for the SEC to have utilized both
Section 53.3 and Section 64 as basis for the CDO at the
same time.
_______________
55 Rollo, pp. 186-187.
56 Id., at p. 187.
57 Id., at p. 188.
717
VOL. 585, APRIL 16, 2009 717

(Eighth Division)
The CDO under Section 53.3 is premised on distinctly

different requisites than the CDO under Section 64. Even
more crucially, the lifetime of the CDO under Section 53.3
is confined to a definite span of ten (10) days, which is not
the case with the CDO under Section 64. This CDO under
Section 64 may be the object of a formal request for lifting
within five (5) days from its issuance, a remedy not

expressly afforded to the CDO under Section 53.3.
Any respondent to a CDO which cites both Section 53.3
and Section 64 would not have an intelligent or adequate
basis to respond to the same. Such respondent would not
know whether the CDO would have a determinate lifespan
of ten (10) days, as in Section 53.3, or would necessitate a
formal request for lifting within five (5) days, as required
under Section 64.1. This lack of clarity is to the obvious
prejudice of the respondent, and is in clear defiance of the
constitutional right to due process of law. Indeed, the
veritable mélange that the assailed CDO is, with its
jumbled mixture of premises and conclusions, the
antithesis of due process.
Had the CDO issued by the SEC expressed the length of
its term, perhaps greater clarity would have been offered
on what Section of the SRC it is based. However, the CDO
is precisely silent as to its lifetime, thereby precluding
much needed clarification. In view of the statutory
differences among the three CDOs under the SRC, it is
essential that the SEC, in issuing such injunctive relief,
identify the exact provision of the SRC on which the CDO
is founded. Only by doing so could the adversely affected
party be able to properly evaluate whatever his responses
under the law.
To make matters worse for the SEC, the fact that the
CDO was signed, much less apparently deliberated upon,
by only by one commissioner likewise renders the order
fatally infirm.
The SEC is a collegial body composed of a Chairperson
and four (4) Commissioners.58 In order to constitute a
quorum to
_______________
58 See SRC, Sec. 4.1.
718

(Eighth Division)
conduct business, the presence of at least three (3)

Commissioners is required.59 In the leading case of GMCR
v. Bell,60 we definitively explained the nature of a collegial
body, and how the act of one member of such body, even if
the head, could not be considered as that of the entire body
itself. Thus:
„We hereby declare that the NTC is a collegial body requiring a

majority vote out of the three members of the commission in order
to validly decide a case or any incident therein. Corollarily, the vote
alone of the chairman of the commission, as in this case, the vote of
Commissioner Kintanar, absent the required concurring vote
coming from the rest of the membership of the commission to at
least arrive at a majority decision, is not sufficient to legally render
an NTC order, resolution or decision.
Simply put, Commissioner Kintanar is not the National
Telecommunications Commission. He alone does not speak for and
in behalf of the NTC. The NTC acts through a three-man body, and
the three members of the commission each has one vote to cast in
every deliberation concerning a case or any incident therein that is
subject to the jurisdiction of the NTC. When we consider the
historical milieu in which the NTC evolved into the quasi-judicial
agency it is now under Executive Order No. 146 which organized
the NTC as a three-man commission and expose the illegality of all
memorandum circulars negating the collegial nature of the NTC
under Executive Order No. 146, we are left with only one logical
conclusion: the NTC is a collegial body and was a collegial body
even during the time when it was acting as a one-man regime.‰61
We can adopt a virtually word-for-word observation with

respect to former Commissioner Martinez and the SEC.
Simply put, Commissioner Martinez is not the SEC. He
alone does not speak for and in behalf of the SEC. The SEC
acts through a five-person body, and the five members of
the commission each has one vote to cast in every
deliberation
_______________
59 See SRC, Sec. 4.5.
60 G.R. No. 126496, 30 April 1997, 271 SCRA 790.
61 Id., at pp. 804-805.
719
VOL. 585, APRIL 16, 2009 719

(Eighth Division)
concerning a case or any incident therein that is subject to

the jurisdiction of the SEC.
GSIS attempts to defend former Commissioner
MartinezÊs action, but its argument is without merit. It
cites SEC Order No. 169, Series of 2008, whereby Martinez
was designated as „Officer-in-Charge of the Commission for
the duration of the official travel of the Chairperson to
Paris, France, to attend the 33rd Annual Conference of the
[IOSCO] from May 26-30, 2008.‰62 As officer-in-charge
(OIC), Martinez was „authorized to sign all documents and
papers and perform all other acts and deeds as may be
necessary in the day-to-day operation of the Commission.‰
It is clear that Martinez was designated as OIC because
of the official travel of only one member, Chairperson Fe
Barin. Martinez was not commissioned to act as the SEC
itself. At most, he was to act in place of Chairperson Barin
in the exercise of her duties as Chairperson of the SEC.
Under Section 4.3 of the SRC, the Chairperson is the chief
executive officer of the SEC, and thus empowered to
„execute and administer the policies, decisions, orders and
resolutions approved by the Commission,‰ as well as to
„have the general executive direction and supervision of the
work and operation of the Commission.‰63 It is in relation
to the exercise of these duties of the Chairperson, and not
to the functions of the Commission, that Martinez was
„authorized to sign all documents and papers and perform
all other acts and deeds as may be necessary in the day-to-
day operation of the Commission.‰
GSIS likewise cites, as authority for MartinezÊs
unilateral issuance of the CDO, Section 4.6 of the SRC,
which states that the SEC „may, for purposes of efficiency,
delegate any of its functions to any department or office of
the Commission, an individual Commissioner or staff
member of the Commission except its review or appellate
authority and its power to
_______________
62 Rollo, p. 63.
63 SRC, Sec. 4.3.
720

(Eighth Division)
adopt, alter and supplement any rule or regulation.‰

Reliance on this provision is inappropriate. First, there is
no convincing demonstration that the SEC had delegated to
Martinez the authority to issue the CDO. The SEC Order
designating Martinez as OIC only authorized him to
exercise the functions of the absent Chairperson, and not of
the Commission. If the Order is read as enabling Martinez
to issue the CDO in behalf of the Commission, it would be
akin to conceding that the SEC Chairperson, acting alone,
can issue the CDO in behalf of the SEC itself. That again
contravenes our holding in GMCR v. Bell.
In addition, it is clear under Section 4.6 that the ability
to delegate functions to a single commissioner does not
extend to the exercise of the review or appellate authority
of the SEC. The issuance of the CDO is an act of the SEC
itself done in the exercise of its original jurisdiction to
review actual cases or controversies. If it has not been clear
to the SEC before, it should be clear now that its power to
issue a CDO can not, under the SRC, be delegated to an
individual commissioner.
V.
In the end, even assuming that the events narrated in

our Resolution in A.M. No. 08-8-11-CA constitute sufficient
basis to nullify the assailed decision of the Court of
Appeals, still it remains clear that the reliefs GSIS seeks of
this Court have no basis in law. Notwithstanding the black
mark that stains the appellate courtÊs decision, the first
paragraph of its fallo, to the extent that it dismissed the
complaint of GSIS with the SEC for lack of jurisdiction and
consequently nullified the CDO and SDO, defies unbiased
scrutiny and deserves affirmation.
A.
In its dispositive portion, the Court of Appeals likewise

pronounced that the complaint filed by GSIS with the SEC
should be barred from being considered „as an election
contest
721
VOL. 585, APRIL 16, 2009 721

(Eighth Division)
in the RTC‰, given that the fifteen (15) day prescriptive

period to file an election contest with the RTC, under
Section 3, Rule 6 of the Interim Rules, had already run its
course.64 Yet no such relief was requested by private
respondents in their petition for certiorari filed with the
Court of Appeals.65 Without disputing the legal predicates
surrounding this pronouncement, we note that its tenor, if
not the text, unduly suggests an unwholesome pre-emptive
strike. Given our observations in A.M. No. 08-8-11-CA of
the „undue interest‰ exhibited by the author of the
appellate court decision, such declaration is best deleted.
Nonetheless, we do trust that any court or tribunal that
may be confronted with that premise adverted to by the
Court of Appeals would know how to properly treat the
same.
B.
Finally, we turn to the sanction on the lawyers of GSIS

imposed by the Court of Appeals.
Nonetheless, we find that as a matter of law the
sanctions are unwarranted. The charter of GSIS66 is unique
among government owned or controlled corporations with
original charter in that it allocates a role for its internal
legal counsel that is in conjunction with or complementary
to the Office of the Government Corporate Counsel
(OGCC), which is the statutory legal counsel for GOCCs.
Section 47 of GSIS charter reads:
SEC. 47. Legal Counsel.·The Government Corporate Counsel
shall be the legal adviser and consultant of GSIS, but GSIS may
assign to the Office of the Government Corporate Counsel (OGCC)
cases for legal action or trial, issues for legal opinions, preparation
and review of contracts/agreements and others, as GSIS may decide
_______________
64 Rollo, p. 141.
65 Id., at p. 246.
66 P.D. No. 1146, as amended by Rep. Act No. 8291 (1997).
722

Division)
or determine from time to time: Provided, however, That the

present legal services group in GSIS shall serve as its in-house legal
counsel.
The GSIS may, subject to approval by the proper court, deputize
any personnel of the legal service group to act as special sheriff in
the enforcement of writs and processes issued by the court, quasi-
judicial agencies or administrative bodies in cases involving
GSIS.‰67
The designation of the OGCC as the legal counsel for

GOCCs is set forth by statute, initially by Rep. Act No.
3838, then reiterated by the Administrative Code of 1987.68
Given that the designation is statutory in nature, there is
no impediment for Congress to impose a different role for
the OGCC with respect to particular GOCCs it may
charter. Congress appears to have done so with respect to
GSIS, designating the OGCC as a „legal adviser and
consultant,‰ rather than as counsel to GSIS. Further, the
law clearly vests unto GSIS the discretion, rather than the
duty, to assign cases to the OGCC for legal action, while
designating the present legal services group of GSIS as „in-
house legal counsel.‰ This situates GSIS differently from
the Land Bank of the Philippines, whose own in-house
lawyers have persistently argued before this Court to no
avail on their alleged right to file petitions before us
instead of the OGCC.69 Nothing in the Land Bank charter70
vested it with the discretion to choose when to assign cases

to the OGCC, notwithstanding the establishment of its own
Legal Department.71
_______________
67 P.D. No. 1146, Sec. 47, as amended by Rep. Act No. 8291 (1997).
68 See Phividec Industrial Authority v. Capitol Steel, 460 Phil. 493,
500-501; 414 SCRA 327, 330 (2003).
69 See e.g., the Resolutions dated 27 April 2005 & 13 July 2005, Land
Bank v. Luciano, G.R. No. 165428.
70 Rep. Act No. 3844 (1963).
71 See Section 91, Rep. Act No. 3844 (1963). „SECTION 91. Legal
Counsel.·The Secretary of Justice shall be ex-officio legal adviser of the
Bank. Any provision of law to the contrary notwithstanding, the Land
Bank shall have its own Legal Department, the
723
VOL. 585, APRIL 16, 2009 723

(Eighth Division)
Congress is not bound to retain the OGCC as the

primary or exclusive legal counsel of GSIS even if it
performs such a role for other GOCCs. To bind Congress to
perform in that manner would be akin to elevating the
OGCCÊs statutory role to irrepealable status, and it is basic
that Congress is barred from passing irrepealable laws.72
C.
We close by acknowledging that the surrounding

circumstances behind these petitions are unfortunate,
given the events as narrated in A.M. No. 08-8-11-CA. While
due punishment has been meted on the errant magistrates,
the corporate world may very well be reminded that the
members of the judiciary are not to be viewed or treated as
mere pawns or puppets in the internecine fights
businessmen and their associates wage against other
businessmen in the quest for corporate dominance. In the
end, the petitions did afford this Court to clarify
consequential points of law, points rooted in principles
which will endure long after the names of the participants

in these cases have been forgotten.
WHEREFORE, the petition in G.R. No. 184275 is
EXPUNGED for lack of capacity of the petitioner to bring
forth the suit.
The petition in G.R. No. 183905 is DISMISSED for lack
of merit except that the second and third paragraphs of the
fallo of the assailed decision dated 23 July 2008 of the
Court of Appeals, including subparagraphs (1), (2), 2(a),
2(b), 2(c) and 2(d) under the second paragraph, are hereby
DELETED.
_______________
chief and members of which shall be appointed by the Board of Trustees.

The composition, budget and operating expenses of the Office of the
Legal Counsel and the salaries and traveling expenses of its officers and
employees shall be fixed by the Board of Trustees and paid by the Bank.‰
72 See City of Davao v. Regional Trial Court of Davao City, Branch

XII, G.R. No. 127383, 18 August 2005, 467 SCRA 280.
724

(Eighth Division)
No pronouncements as to costs.
SO ORDERED.
Quisumbing (Chairperson), Carpio-Morales, Velasco,

Jr. and Brion, JJ., concur.
Petition in G.R. No. 184275 expunged, while petition in

G.R. No. 183905 dismissed.
Notes.·The PAB is the very agency of the government

with the task of determining whether the effluents of a
particular industrial establishment comply with or violate
applicable anti-pollution statutory and regulatory
provisions, with power to issue, ex parte, cease and desist

orders. (Estrada vs. Court of Appeals, 442 SCRA 117
[2004])
There are two essential requirements that must be
complied with by the Securities and Exchange Commission
(SEC) before it may issue a cease and desist order·first, it
must conduct proper investigation or verification, and,
second, there must be a finding that the act or practice,
unless restrained, will operate as a fraud on investors or is
otherwise likely to cause grave or irreparable injury or
prejudice to the investing public. (Securities and Exchange
Commission vs. Performance Foreign Exchange
Corporation, 495 SCRA 579 [2006])
··o0o··
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SUPREME COURT REPORTS ANNOTATED VOLUME 585 2/2/20, 3:53 PM

Finally, it bears underscoring that appellant himself

Quisumbing (Chairperson), Carpio-Morales, Velasco,

Judgment affirmed in toto.

Note.·It is the duty of the prosecution to present a

G.R. No. 183905. April 16, 2009.*

GOVERNMENT SERVICE INSURANCE SYSTEM,

G.R. No. 184275. April 16, 2009.*

SECURITIES AND EXCHANGE COMMISSION,

27 TSN, 27 January 2004, pp. 13-14, 16.

680 SUPREME COURT REPORTS ANNOTATED

ITY AS OFFICER-IN-CHARGE OF THE SECURITIES

Appeals; Parties; Under Section 1 of Rule 45, which governs

classified as real parties-in-interest. Under the provision, the judge,

VOL. 585, APRIL 16, 2009 681

Government Service Insurance System vs. Court of Appeals (Eighth

concerns the validation of such secured and submitted proxies.

682 SUPREME COURT REPORTS ANNOTATED

Government Service Insurance System vs. Court of Appeals (Eighth

also to proxy validation. Should the proposition hold true up to the

VOL. 585, APRIL 16, 2009 683

Government Service Insurance System vs. Court of Appeals (Eighth

directors or trustees, in which stockholders are authorized

election contests or controversies. The power of the SEC to

684 SUPREME COURT REPORTS ANNOTATED

Government Service Insurance System vs. Court of Appeals (Eighth

found in Section 53.3, involves a determination by the Securities and

VOL. 585, APRIL 16, 2009 685

Government Service Insurance System vs. Court of Appeals (Eighth

Both require a common finding of a need to prevent fraud or injury

demurring to state whether it was seeking the CDO under Section

686 SUPREME COURT REPORTS ANNOTATED

Government Service Insurance System vs. Court of Appeals (Eighth

CDO it was issuing is more unpardonable, as it is an act that

under Section 53.3 is confined to a definite span of ten (10) days,

VOL. 585, APRIL 16, 2009 687

Government Service Insurance System vs. Court of Appeals (Eighth

Same; Same; Same; Same; Same; Same; Same; Same; In view

apparently deliberated upon, by only by one commissioner likewise

688 SUPREME COURT REPORTS ANNOTATED

Government Service Insurance System vs. Court of Appeals (Eighth

conjunction with or complementary to the Office of the Government

VOL. 585, APRIL 16, 2009 689

Government Service Insurance System vs. Court of Appeals (Eighth

discretion to choose when to assign cases to the OGCC,

SPECIAL CIVIL ACTION in the Supreme Court.

690 SUPREME COURT REPORTS ANNOTATED

These are the undisputed facts.

1 Rollo (G.R. No. 183905) (hereinafter, „Rollo‰), pp. 24, 884.

VOL. 585, APRIL 16, 2009 691

05777-C4 seeking the declaration of certain proxies as

692 SUPREME COURT REPORTS ANNOTATED

Jesus Martinez was issued on 26 May 2008, the same day

„WHEREFORE, premises considered, the May 26, 2008

24 Id., at pp. 192-193.

VOL. 585, APRIL 16, 2009 693

engaging in forum shopping;

694 SUPREME COURT REPORTS ANNOTATED

Pasay City and (ii) in the SEC, in order to ensure a

The promulgation of the said decision provoked a

SECÊs jurisdiction over the petition filed before it by GSIS,

VOL. 585, APRIL 16, 2009 695

three self-identified „Attorney[s],‰ presumably holding